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Rebound Effect

When a particular activity involving energy consumption becomes more energy efficient, some of the expected energy savings are reinvested in the good or service, or they are used elsewhere in the economy. This phenomenon is called the rebound effect. In an extreme case, the rebound can be greater than 100%. This scenario is called backfire, or Jevons' Paradox, which means that energy efficiency actually leads to increased energy consumption. While theoretically possible, backfire probably does not occur in general 1, 2, though is happening with information technology.

Based on the following survey of recent studies, a rebound of about 50% appears to happen in general. We emphasize that the values are highly uncertain.

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Sources: Amjadi et al. 3, Barker et al. 4, Broberg et al. 5, De Borger et al. 6, Freire-González 7, Gillingham et al. 1, Lin and Liu 8, Lin and Tan 9, Lin and Tian 10, Liu et al. 11, Moshiri and Aliyev 12, Nadel 13, Orea et al. 14, Saunders 15, Shao et al. 16, Wang et al. 17, Zhang et al. 18, Zhang and Peng 19, Zhang et al. 20.

Rebound is not necessarily a bad thing or an argument against energy efficiency. From the perspective of overall welfare, consumers are better off with the rebound than without, unless the rebounded energy consumption has severe negative externalities 1. However, from an energy conservation or greenhouse gas reduction standpoint, the rebound effect must be taken into account.

Induced Demand

While the rebound effect is well-established for energy consumption, a similar effect holds for energy production. When a clean energy source is deployed, only a portion of the new production displaces fossil fuel production, and the rest either displaces another clean energy source or induces new demand.

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Sources: Hu and Cheng 21, Little and Sadorsky 22, McGee 23, Qiu et al. 24, York 25.

Similar patterns hold with natural gas augmenting as well as displacing coal in electricity 26 and with renewable energy complementing nonrenewable energy in OECD industry 27. Since 1800, the share of traditional biofuels in the world energy supply has fallen from 98% to 7% 28. Yet, in absolute terms, the usage of biofuels has doubled and peaked only in 2000.

Beyond the energy sector, the rebound effect has been observed in several areas.

Rebound Effects From Non-Energy Sectors
FieldObservationSource
FarmingImproving yields increase overall food productionEwers et al.
WaterImproved irrigation efficiency increases water usageLi and Zhao
WaterImproved irrigation efficiency increases water usageLoch and Adamson
Raw MaterialsMaterial efficiency increases demand for productsPfaff and Satorious
Primary MetalsEfficiency in primary metal uses increases demandLifset and Echelman
Recycling and RemanufacturingRecycling and remanufacuring can increase demand for productsZink and Geyer
AquacultureAquaculture has mostly supplemented, rather than replaced, wild catchLongo et al.

Select studies reporting rebound effects in non-energy sectors. Sources: Ewers et al. 29, Li and Zhao 30, Lifset and Eckelman 31, Lock and Adamson 32, Longo et al. 33, Pfaff and Satorious 34, Zink and Geyer 35.

It cannot be assumed that the deployment of low-carbon energy sources will, in and of itself, reduce fossil fuel usage.

References

  1. Gillingham, K., Rapson, D., Wagner, G. "The Rebound Effect and Energy Efficiency Policy". October 2014. ↩ ↩2 ↩3

  2. Stern, D. "The Role of Energy in Economic Growth". Centre for Climate & Economics Policy, Working Paper 3.10. October 2010. ↩

  3. Amjadi, G., Lundgren, T., Persson, L. "The Rebound Effect in Swedish Heavy Industry". Energy Economics 71, pp. 140-148. March 2018. ↩

  4. Barker, T., Dagoumas, A., Rubin, J. "The macroeconomic rebound effect and the world economy". Energy Efficiency 2, pp. 411-427. 2009. ↩

  5. Broberg, T., Berg, C., Samakovlis, E. "The economy-wide rebound effect from improved energy efficiency in Swedish industries–A general equilibrium analysis". Energy Policy 83, pp. 26-37. August 2015. ↩

  6. De Borger, B., Mulalic, I., Rouwendal, J. "Measuring the rebound effect with micro data: A first difference approach". Journal of Environmental Economics and Management 79, pp. 1-17. September 2016. ↩

  7. Freire-González, J. "Evidence of direct and indirect rebound effect in households in EU-27 countries". Energy Policy 102, pp. 270-276. March 2017. ↩

  8. Lin, B., Liu, H. "A study on the energy rebound effect of China's residential building energy efficiency". Energy and Buildings 86, pp. 608-618. January 2015. ↩

  9. Lin, B., Tan, R. "Estimating energy conservation potential in China’s energy intensive industries with rebound effect". Journal of Cleaner Production 156, pp. 899-910. July 2017. ↩

  10. Lin, B., Tian, P. "The energy rebound effect in China's light industry: a translog cost function approach". Journal of Cleaner Production 112(4), pp. 2793-2801. January 2016. ↩

  11. Liu, J., Sun, X., Lu, B., Zhang, Y., Sun, R. "The life cycle rebound effect of air-conditioner consumption in China". Applied Energy 184, pp. 1026-1032. December 2016. ↩

  12. Moshiri, S., Aliyev, K. "Rebound effect of efficiency improvement in passenger cars on gasoline consumption in Canada". Ecological Economics 131, pp. 330-341. January 2017. ↩

  13. Nadel, S. "The Rebound Effect: Large or Small?". American Council for an Energy-Efficient Economy, White Paper. August 2012. ↩

  14. Orea, L., Llorca, M., Filippini, M. "A new approach to measuring the rebound effect associated to energy efficiency improvements: An application to the US residential energy demand". Energy Economics 49, pp. 599-609. May 2015. ↩

  15. Saunders, H. "Historical evidence for energy efficiency rebound in 30 US sectors and a toolkit for rebound analysts". Technology Forecasting and Social Change 80(7), pp. 1317-1330. September 2013. ↩

  16. Shao, S., Guo, L., Yu, M., Yang, L., Guan, D. "Does the rebound effect matter in energy import-dependent mega-cities? Evidence from Shanghai (China)". Applied Energy 241, pp. 212-228. May 2019. ↩

  17. Wang, Z., Han, B., Lu, M. "Measurement of energy rebound effect in households: Evidence from residential electricity consumption in Beijing, China". Renewable and Sustainable Energy Reviews 58, pp. 852-861. May 2016. ↩

  18. Zhang, Y., Lui, Z., Qin, C., Tan, T. "The direct and indirect CO2 rebound effect for private cars in China". Energy Policy 100, pp. 149-161. January 2017. ↩

  19. Zhang, Y., Peng, H. "Exploring the direct rebound effect of residential electricity consumption: An empirical study in China". Applied Energy. June 2017. ↩

  20. Zhang, Y., Peng, H., Liu, Z., Tan, W. "Direct energy rebound effect for road passenger transport in China: A dynamic panel quantile regression approach". Energy Policy 87, pp. 303-313. December 2015. ↩

  21. Hu, Y., Cheng, H. "Displacement efficiency of alternative energy and trans-provincial imported electricity in China". Nature Communications 8. February 2017. ↩

  22. Little, B., Sadorsky, P. "How much does increasing non-fossil fuels in electricity generation reduce carbon dioxide emissions?". Applied Energy 197, pp. 212-221. July 2017. ↩

  23. McGee, J. "The Treadmill of Alternatively Fueled Vehicle Production". Human Ecology Review 23(1), pp. 81-99. September 2017. ↩

  24. Qiu, Y., Kahn, M., Xing, B. "Quantifying the rebound effects of residential solar panel adoption". Journal of Environmental Economics and Management 96, pp. 310-341. July 2019. ↩

  25. York, R. "Do alternative energy sources displace fossil fuels?". Nature Climate Change 2, pp. 441-443. 2012. ↩

  26. Greiner, P., York, R., McGee, J. "Snakes in The Greenhouse: Does increased natural gas use reduce carbon dioxide emissions from coal consumption?". Energy Research & Social Science 38, pp. 53.57. April 2018. ↩

  27. Kumar, S., Fujii, H., Managi, S. "Substitute or complement? Assessing renewable and nonrenewable energy in OECD countries". Applied Economics 47(14). January 2015. ↩

  28. Ritchie, H,. Roser, M. "Energy Production & Changing Energy Sources". Our World in Data. Accessed May 19, 2019. ↩

  29. Ewers, R., Scharlemann, J., Balmford, A., Green, R. "Do increases in agricultural yield spare land for nature?". Global Change Biology. June 2009. ↩

  30. Li, H., Zhao. J. "Rebound Effects of New Irrigation Technologies: The Role of Water Rights". American Journal of Agricultural Economics 100(3), pp. 786-808. April 2018. ↩

  31. Lifset, R., Eckelman, M. "Material efficiency in a multi-material world". Philosophical Transactions of the Royal Society A 371(1986). March 2013. ↩

  32. Loch, A., Adamson, D. "Drought and the rebound effect: a Murray–Darling Basin example". Natural Hazards 79(3), pp. 1429-1449. December 2015. ↩

  33. Longo, S., Clark, B., York, R., Jorgenson, A. "Aquaculture and the displacement of fisheries captures". Conservation Biology. February 2019. ↩

  34. Pfaff, M., Satorious, C. "Economy-wide rebound effects for non-energetic raw materials". Ecological Economics 118, pp. 132-139. October 2015. ↩

  35. Zink, T., Geyer, R. "Circular Economy Rebound". Journal of Industrial Ecology. February 2017. ↩